WorldCom Secures $1.5-Billion Loan From Bank Group

WorldCom Inc., struggling to raise cash to pay its debt, won a $1.5-billion loan after it agreed to make more frequent repayments, people familiar with the matter said Wednesday.

Banks led by J.P. Morgan Chase & Co. and Bank of America Corp. will provide the loan, and WorldCom will announce details of the terms today, said Brad Burns, a spokesman for the second-biggest long-distance telephone company.

“It’s good they got this done,” said Robert Rock, a fixed-income analyst at John Hancock Advisers Inc., which owns 31,359 WorldCom shares. The shares rose 23 cents to $1.65 on Nasdaq.

The accord, which increases the likelihood WorldCom can secure an additional $5 billion in new borrowing, eliminates a provision in an earlier financing that required the Clinton, Miss.-based company to maintain investment-grade ratings.

In exchange, WorldCom agreed to pay back the cash it gets from customer bills every 10 days, instead of once a month, sources said.

WorldCom, whose debt was downgraded to junk last week, is prepared to pledge assets and pay twice the interest rates it now pays for the $5 billion in new loans, sources said.

Banks can demand tighter terms and higher rates because WorldCom needs money to pay back as much as $3.4 billion in debt that may come due in the next 18 months, and more than $2 billion in 2004.

WorldCom said Tuesday that it will buy the MCI Group stock that tracks its consumer unit to save $284 million in annual dividend costs. Last week it said it will draw down a $2.65-billion bank credit line to buy more time to negotiate with its lenders.

The moves to raise cash came after Standard & Poor’s Corp. and Moody’s Investors Service cut WorldCom’s $30 billion of debt to junk and its bonds fell to less than half their face value. The company was dropped last week from the S&P; 500 index after a 90% decline in its stock price.

The new asset-backed receivables program, which replaces an existing $2-billion agreement, gives WorldCom less time to earn interest on cash it invests.

In addition to its receivables program, WorldCom said last week it planned to take out a new $2.65-billion loan secured with assets and add $750 million to an existing $1.6-billion loan that’s due in 2006. The company had $8 billion in credit lines and will allow a $3.75-billion line to expire at the end of June.